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PREFERRED SECURITIES GUARANTEE AGREEMENT
Designer Holdings Ltd.
Dated as of November 6, 1996
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. Definitions and Interpretation............................ 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application.......................... 6
SECTION 2.2. Lists of Holders of Securities............................ 7
SECTION 2.3. Reports by the Preferred Guarantee
Trustee................................................. 7
SECTION 2.4. Periodic Reports to the Preferred
Guarantee Trustee....................................... 8
SECTION 2.5. Evidence of Compliance with
Conditions Precedent.................................... 8
SECTION 2.6. Event of Default; Waiver.................................. 8
SECTION 2.7. Event of Default; Notice.................................. 8
SECTION 2.8. Conflicting Interests..................................... 9
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
THE PREFERRED GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Preferred
Guarantee Trustee....................................... 9
SECTION 3.2. Certain Rights of the Preferred
Guarantee Trustee....................................... 11
SECTION 3.3. Not Responsible for Recitals or
Issuance of Guarantee................................... 14
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1. Preferred Guarantee Trustee;
Eligibility............................................. 15
SECTION 4.2. Appointment, Removal and Resignation
of Preferred Guarantee Trustees.......................... 15
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ARTICLE V
GUARANTEE
SECTION 5.1. Guarantee................................................. 17
SECTION 5.2. Subordination............................................. 17
SECTION 5.3. Waiver of Notice and Demand............................... 17
SECTION 5.4. Obligations Not Affected.................................. 17
SECTION 5.5. Rights of Holders......................................... 19
SECTION 5.6. Guarantee of Payment...................................... 19
SECTION 5.7. Subrogation............................................... 19
SECTION 5.8. Independent Obligations................................... 20
SECTION 5.9. Conversion................................................ 20
ARTICLE VI
LIMITATION OF TRANSACTIONS; RANKING
SECTION 6.1. Limitation of Transactions................................ 20
SECTION 6.2. Ranking................................................... 21
ARTICLE VII
TERMINATION
SECTION 7.1. Termination............................................... 21
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. Exculpation............................................... 22
SECTION 8.2. Indemnification........................................... 22
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Successors and Assigns.................................... 23
SECTION 9.2. Amendments................................................ 23
SECTION 9.3. Notices................................................... 23
SECTION 9.4. Benefit................................................... 24
SECTION 9.5. Governing Law............................................. 24
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PREFERRED SECURITIES GUARANTEE AGREEMENT
This PREFERRED SECURITIES GUARANTEE AGREEMENT (the "Preferred Securities
Guarantee"), dated as of November 6, 1996, is executed and delivered by Designer
Holdings Ltd., a Delaware corporation (the "Guarantor"), and IBJ Xxxxxxxx Bank &
Trust Company, a New York banking corporation as trustee (the "Preferred
Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Preferred Securities (as defined herein) of Designer Finance
Trust, a Delaware statutory business trust (the "Trust");
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of November 6, 1996, among the trustees of the Trust
named therein, the Guarantor, as sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Trust, the Trust is issuing
on the date hereof 2,400,000 preferred securities, having an aggregate
liquidation amount of $120,000,000 (plus up to an additional 360,000 preferred
securities, having an aggregate liquidation amount of $18,000,000 to cover
over-allotments), designated the 6% Convertible Trust Originated Preferred
Securities'sm' (the "Preferred Securities");
WHEREAS, as incentive for the Holders to purchase the Preferred Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Preferred Securities Guarantee, to guarantee the obligations
of the Trust to the Holders of the Preferred Securities on the terms and
conditions set forth herein;
WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (the "Common Securities Guarantee") in substantially identical terms
to this Preferred Securities Guarantee for the benefit of the holders of the
Common Securities (as defined herein), except that if an event of default (as
defined in the Indenture (as defined herein)), has occurred and is continuing,
the rights of holders of the Common Securities to receive Guarantee Payments (as
defined in the Common Securities Guarantee) under the Common Securities
Guarantee shall be subordinated to the rights of Holders of Preferred Securities
to receive Guarantee
Payments (as defined herein) under this Preferred Securities Guarantee; and
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. Definitions and Interpretation.
In this Preferred Securities Guarantee, unless the context otherwise
requires:
(a) Capitalized terms used in this Preferred
Securities Guarantee but not defined in the
preamble above have the respective meanings
assigned to them in this Section 1.1;
(b) terms defined in the Declaration as at the date
hereof have the same meaning when used in this
Preferred Securities Guarantee unless otherwise
defined in this Preferred Securities Guarantee;
(c) a term defined anywhere in this Preferred
Securities Guarantee has the same meaning
throughout;
(d) all references to "the Preferred Securities
Guarantee" or "this Preferred Securities
Guarantee" are to this Preferred Securities
Guarantee as modified, supplemented or amended
from time to time;
(e) all references in this Preferred Securities
Guarantee to Articles and Sections are to Articles
and Sections of this Preferred Securities
Guarantee, unless otherwise specified;
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(f) a term defined in the Trust Indenture Act has the
same meaning when used in this Preferred
Securities Guarantee, unless otherwise defined in
this Preferred Securities Guarantee or unless the
context otherwise requires;
(g) a reference to the singular includes the plural
and vice versa;
(h) a reference to any Person shall include its
successors and assigns;
(i) a reference to any agreement or instrument shall
mean such agreement or instrument, as
supplemented, modified, amended, or amended and
restated, and in effect from time to time; and
(j) a reference to any statute, law, rule or
regulation, shall include any amendments thereto
applicable to the relevant Person, and any
successor statute, law, rule or regulation.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act of 1933, as amended, or any successor rule thereunder.
"Authorized Officer" of a Person means any Person that is authorized to bind
such Person.
"Business Day" means any day other than a day on which banking institutions
in New York, New York or in Wilmington, Delaware are authorized or required by
any applicable law or executive order to close.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Trust.
"Corporate Trust Office" means the office of the Preferred Guarantee Trustee
at which the corporate trust business of the Preferred Guarantee Trustee shall,
at any particular time, be principally administered, which office at the date of
execution of this Agreement is located at Xxx Xxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx
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Xxxx 00000, Attention: Corporate Trust & Agency Department.
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"Debentures" means the 6% Convertible Subordinated Debentures due December
31, 2016 of the Guarantor held by the Property Trustee (as defined in the
Declaration).
"Event of Default" means a default by the Guarantor on any of its payment or
other obligations under this Preferred Securities Guarantee.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not paid or
made by the Trust: (i) any accrued and unpaid Distributions (as defined in the
Declaration) that are required to be paid on the Preferred Securities to the
extent the Trust has funds available therefor, (ii) the redemption price, with
respect to any Preferred Securities called for redemption by the Trust (the
"Redemption Price"), to the extent the Trust has funds available therefor, and
(iii) upon a voluntary or involuntary dissolution, winding-up or termination of
the Trust (other than in connection with the distribution of Convertible
Subordinated Debentures to the Holders of Preferred Securities or the redemption
of all the Preferred Securities (as provided in the Declaration)), the lesser of
(a) the aggregate of the liquidation amount and all accrued and unpaid
Distributions on the Preferred Securities to the date of payment to the extent
the Trust has funds available therefor and (b) the amount of assets of the Trust
remaining available for distribution to Holders of Preferred Securities upon the
liquidation of the Trust (in either case, the "Liquidation Distribution").
"Holder" shall mean any holder, as registered on the books and records of
the Trust of any Preferred Securities; provided, however, that in determining
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor or any Affiliate of the Guarantor.
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"Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate of
the Preferred Guarantee Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives, nominees, custodians or agents of
the Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of November 6, 1996, among the
Guarantor (the "Convertible Debenture Issuer") and IBJ Xxxxxxxx Bank & Trust
Company, a New York banking corporation, as trustee, pursuant to which the
Debentures are to be issued to the Property Trustee of the Trust.
"Indenture Trustee" means the Person acting as trustee under the Indenture,
initially IBJ Xxxxxxxx Bank & Trust Company.
"Majority in liquidation amount of the Preferred Securities" means, except
as provided by the Trust Indenture Act, a vote by Holder(s) of Preferred
Securities, voting separately as a class, of more than 50% of the liquidation
amount of all Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by two Authorized Officers of such Person. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Preferred Securities Guarantee shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definition
relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in
rendering the Officers' Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion
as to whether or not such covenant or condition has been complied
with; and
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(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Preferred Guarantee Trustee" means IBJ Xxxxxxxx Bank & Trust Company, until
a Successor Preferred Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Preferred Securities Guarantee and
thereafter means each such Successor Preferred Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer within the Corporate Trust Office of the Preferred
Guarantee Trustee, including any vice president, any assistant vice president,
any assistant secretary, the treasurer, any assistant treasurer or other officer
of the Corporate Trust Office of the Preferred Guarantee Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.
"Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application.
(a) This Preferred Securities Guarantee is subject to the provisions of the
Trust Indenture Act that are required to be part of this Preferred Securities
Guarantee and shall, to the extent applicable, be governed by such provisions.
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(b) If and to the extent that any provision of this Preferred Securities
Guarantee limits, qualifies or conflicts with the duties imposed by Sections 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
SECTION 2.2. List of Holders of Securities.
(a) The Guarantor shall provide the Preferred Guarantee Trustee with a list,
in such form as the Preferred Guarantee Trustee may reasonably require, of the
names and addresses of the Holders of the Preferred Securities ("List of
Holders") as of such date, (i) within one Business Day after January 1 and June
30 of each year, and (ii) at any other time within 30 days of receipt by the
Guarantor of a written request for a List of Holders as of a date no more than
14 days before such List of Holders is given to the Preferred Guarantee Trustee,
provided that the Guarantor shall not be obligated to provide such List of
Holders at any time (x) the List of Holders does not differ from the most recent
List of Holders given to the Preferred Guarantee Trustee by the Guarantor or (y)
the Preferred Securities are represented by one or more Global Securities (as
defined in the Indenture). The Preferred Guarantee Trustee may destroy any List
of Holders previously given to it on receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its obligations under
Section 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.3. Reports by the Preferred Guarantee Trustee.
Within 60 days after May 15 of each year, the Preferred Guarantee
Trustee shall provide to the Holders of the Preferred Securities such reports as
are required by Section 313 of the Trust Indenture Act, if any, in the form and
in the manner provided by Section 313 of the Trust Indenture Act. The Preferred
Guarantee Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.
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SECTION 2.4. Periodic Reports to the Preferred Guarantee Trustee.
The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as required by Section 314, if any, and the
compliance certificate required by Section 314 of the Trust Indenture Act in the
form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.
SECTION 2.5. Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Preferred Securities Guarantee that relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given in
the form of an Officers' Certificate.
SECTION 2.6. Event of Default; Waiver.
The Holders of a Majority in liquidation amount of Preferred Securities
may, by vote, on behalf of the Holders of all of the Preferred Securities, waive
any past Event of Default and its consequences. Upon such waiver, any such Event
of Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured, for every purpose of this Preferred
Securities Guarantee, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
SECTION 2.7. Event of Default; Notice.
(a) The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Preferred Securities, notices of all Events of
Default actually known to a Responsible Officer of the Preferred Guarantee
Trustee, unless such defaults have been cured before the giving of such notice;
provided that the Preferred Guarantee Trustee shall be protected in withholding
such notice if and so long as a Responsible Officer of the Preferred Guarantee
Trustee in good faith
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determines that the withholding of such notice is in the interests of the
Holders of the Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have knowledge of
any Event of Default unless the Preferred Guarantee Trustee shall have received
written notice, or of which a Responsible Officer of the Preferred Guarantee
Trustee charged with the administration of the Declaration shall have obtained
actual knowledge.
SECTION 2.8. Conflicting Interests.
The Declaration shall be deemed to be specifically described in this
Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE PREFERRED GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Preferred Guarantee Trustee.
(a) This Preferred Securities Guarantee shall be held by the Preferred
Guarantee Trustee for the benefit of the Holders of the Preferred Securities,
and the Preferred Guarantee Trustee shall not transfer this Preferred Securities
Guarantee to any Person except a Holder exercising his or her rights pursuant to
Section 5.5(b) or to a Successor Preferred Guarantee Trustee on acceptance by
such Successor Preferred Guarantee Trustee of its appointment to act as
Successor Preferred Guarantee Trustee. The right, title and interest of the
Preferred Guarantee Trustee shall automatically vest in any Successor Preferred
Guarantee Trustee, and such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered pursuant
to the appointment of such Successor Preferred Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of the
Preferred Guarantee Trustee has occurred and is continuing, the Preferred
Guarantee Trustee shall enforce this Preferred Securities Guarantee for the
benefit of the Holders of the Preferred Securities.
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(c) The Preferred Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Preferred Securities Guarantee, and no implied covenants shall be read into
this Preferred Securities Guarantee against the Preferred Guarantee Trustee. In
case an Event of Default has occurred (that has not been cured or waived
pursuant to Section 2.6) and is actually known to a Responsible Officer of the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall exercise such
of the rights and powers vested in it by this Preferred Securities Guarantee,
and use the same degree of care and skill in its exercise thereof, as a prudent
man would exercise or use under the circumstances in the conduct of his own
affairs.
(d) No provision of this Preferred Securities Guarantee shall be construed to
relieve the Preferred Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) prior to the occurrence of any Event of Default and after the
curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Preferred Guarantee
Trustee shall be determined solely by the express provisions of
this Preferred Securities Guarantee, and the Preferred Guarantee
Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this
Preferred Securities Guarantee, and no implied covenants or
obligations shall be read into this Preferred Securities Guarantee
against the Preferred Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Preferred
Guarantee Trustee, the Preferred Guarantee Trustee may conclusively
rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Preferred Guarantee Trustee and conforming to the
requirements of this Preferred Securities Guarantee; but in the
case of any such certificates or opinions that by any provision
hereof
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are specifically required to be furnished to the Preferred
Guarantee Trustee, the Preferred Guarantee Trustee shall be under a
duty to examine the same to determine whether or not they conform
to the requirements of this Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of the
Preferred Guarantee Trustee, unless it shall be proved that the
Preferred Guarantee Trustee was negligent in ascertaining the
pertinent facts upon which such judgment was made;
(iii) the Preferred Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of not less
than a Majority in liquidation amount of the Preferred Securities
relating to the time, method and place of conducting any proceeding
for any remedy available to the Preferred Guarantee Trustee, or
exercising any trust or power conferred upon the Preferred Guarantee
Trustee under this Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall
require the Preferred Guarantee Trustee to expend or risk its own
funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers, if the Preferred Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this
Preferred Securities Guarantee or indemnity, reasonably satisfactory
to the Preferred Guarantee Trustee, against such risk or liability is
not reasonably assured to it.
SECTION 3.2. Certain Rights of the Preferred Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee may conclusively rely,
and shall be fully protected in acting or refraining from
acting upon, any resolution, certificate, statement,
instrument,
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opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Preferred Securities Guarantee shall be sufficiently
evidenced by an Officers' Certificate.
(iii) Whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall
deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder, the
Preferred Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on
its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be
promptly delivered by the Guarantor.
(iv) The Preferred Guarantee Trustee shall have no duty to
see to any recording, filing or registration of any instrument
(or any rerecording, refiling or registration thereof).
(v) The Preferred Guarantee Trustee may consult with
counsel of its selection, and the written advice or opinion of
such counsel with respect to legal matters shall be full and
complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and
in accordance with such advice or opinion. Such counsel may be
counsel to the Guarantor or any of its Affiliates and may
include any of its employees. The Preferred Guarantee Trustee
shall have the right at any time to seek instructions
concerning the administration of this Preferred Securities
Guarantee from any court of competent jurisdiction.
(vi) The Preferred Guarantee Trustee shall be under no
obligation to exercise any of the
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rights or powers vested in it by this Preferred Securities
Guarantee at the request or direction of any Holder, unless
such Holder shall have provided to the Preferred Guarantee
Trustee such security and indemnity, reasonably satisfactory
to the Preferred Guarantee Trustee, against the costs,
expenses (including attorneys' fees and expenses) and
liabilities that might be incurred by it in complying with
such request or direction, including such reasonable advances
as may be requested by the Preferred Guarantee Trustee;
provided that nothing contained in this Section 3.2(a)(vi)
shall be taken to relieve the Preferred Guarantee Trustee,
upon the occurrence of an Event of Default, of its obligation
to exercise the rights and powers vested in it by this
Preferred Securities Guarantee.
(vii) The Preferred Guarantee Trustee shall not be bound
to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper
or document, but the Preferred Guarantee Trustee, in its
discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit.
(viii) The Preferred Guarantee Trustee may execute any of
the trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, nominees, custodians
or attorneys, and the Preferred Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it hereunder.
(ix) Any action taken by the Preferred Guarantee Trustee
or its agents hereunder shall bind the Holders of the
Preferred Securities, and the signature of the Preferred
Guarantee Trustee or its agents alone shall be sufficient and
effective to perform any such action. No third party shall be
required to inquire as to the authority of the Preferred
Guarantee Trustee to so act or as to its compliance with any
of the terms
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and provisions of this Preferred Securities Guarantee, both of
which shall be conclusively evidenced by the Preferred
Guarantee Trustee's or its agent's taking such action.
(x) Whenever in the administration of this Preferred
Securities Guarantee the Preferred Guarantee Trustee shall
deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action
hereunder, the Preferred Guarantee Trustee (i) may request
instructions from the Holders of a Majority in liquidation
amount of the Preferred Securities, (ii) may refrain from
enforcing such remedy or right or taking such other action
until such instructions are received and (iii) shall be
protected in conclusively relying on or acting in accordance
with such instructions.
(xi) The Preferred Guarantee Trustee shall not be liable
for any action taken, suffered, or omitted to be taken by it
in good faith and reasonably believed by it to be authorized
or within the discretion or rights or powers conferred upon it
by this Preferred Securities Guarantee.
(b) No provision of this Preferred Securities Guarantee shall be deemed to
impose any duty or obligation on the Preferred Guarantee Trustee to perform any
act or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal, or in which the
Preferred Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts or to exercise any such
right, power, duty or obligation. No permissive power or authority available to
the Preferred Guarantee Trustee shall be construed to be a duty.
SECTION 3.3. Not Responsible for Recitals or Issuance of Guarantee.
The recitals contained in this Preferred Securities Guarantee shall be
taken as the statements of the Guarantor, and the Preferred Guarantee Trustee
does not assume any responsibility for their correctness. The Preferred
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Guarantee Trustee makes no representation as to the validity or sufficiency of
this Preferred Securities Guarantee.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1. Preferred Guarantee Trustee; Eligibility.
(a) There shall at all times be a Preferred Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws
of the United States of America or any State or Territory thereof or
of the District of Columbia, or a corporation or Person permitted by
the Securities and Exchange Commission to act as an institutional
trustee under the Trust Indenture Act, authorized under such laws to
exercise corporate trust powers, having a combined capital and
surplus of at least 50 million U.S. dollars ($50,000,000), and
subject to supervision or examination by Federal, State, Territorial
or District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority referred to
above, then, for the purposes of this Section 4.1(a)(ii), the
combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent
report of condition so published.
(b) If at any time the Preferred Guarantee Trustee shall cease to be eligible
to so act under Section 4.1(a), the Preferred Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Preferred Guarantee Trustee and Guarantor shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.2. Appointment, Removal and Resignation of
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Preferred Guarantee Trustees.
(a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in accordance with
Section 4.2(a) until a Successor Preferred Guarantee Trustee has been appointed
and has accepted such appointment by written instrument executed by such
Successor Preferred Guarantee Trustee and delivered to the Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall hold office
until a Successor Preferred Guarantee Trustee shall have been appointed or until
its removal or resignation. The Preferred Guarantee Trustee may resign from
office (without need for prior or subsequent accounting) by an instrument in
writing executed by the Preferred Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor Preferred
Guarantee Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Preferred Guarantee Trustee and
delivered to the Guarantor and the resigning Preferred Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of removal or resignation, the
resigning or removed Preferred Guarantee Trustee may petition any court of
competent jurisdiction for appointment of a Successor Preferred Guarantee
Trustee. Such court may thereupon, after prescribing such notice, if any, as it
may deem proper, appoint a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the acts or omissions
to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee or removal or
resignation of the Preferred Guarantee Trustee pursuant to this Section 4.2, the
Guarantor shall pay to the Preferred Guarantee Trustee all amounts accrued to
the date of such termination, removal or
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resignation.
ARTICLE V
GUARANTEE
SECTION 5.1. Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders (except to the extent paid by the Trust), as and when due,
regardless of any defense, right of set-off or counterclaim that the Trust may
have or assert, the Guarantee Payments, without duplication. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Guarantor to the Holders or by causing the Trust to pay
such amounts to the Holders.
SECTION 5.2. Subordination.
If an Event of Default (as defined in the Indenture), has occurred and
is continuing, the rights of Holders of Common Securities to receive Guarantee
Payments under the Common Securities Guarantee are subordinate to the rights of
Preferred Securities to receive Guarantee Payments under this Preferred
Securities Guarantee.
SECTION 5.3. Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Trust or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
SECTION 5.4. Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor under
this Preferred Securities Guarantee shall in no way be affected or impaired by
reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Trust of
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any express or implied agreement, covenant, term or condition relating to the
Preferred Securities to be performed or observed by the Trust;
(b) the extension of time for the payment by the Trust of all or any portion
of the Distributions, Redemption Price, Liquidation Distribution or any other
sums payable under the terms of the Preferred Securities or the extension of
time for the performance of any other obligation under, arising out of, or in
connection with, the Preferred Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment period on
the Debentures or any extension of the maturity date of the Debentures permitted
by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Trust granting indulgence or extension of any
kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust;
(e) any invalidity of, or defect or deficiency in, the Preferred Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a legal
or equitable discharge or defense of a guarantor, it being the intent of this
Section 5.4 that the obligations of the Guarantor hereunder shall be absolute
and unconditional under any and all circumstances.
There shall be no obligation of the Holders or any other Persons to give
notice to, or obtain consent of, the Guarantor with respect to the happening of
any of the foregoing.
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SECTION 5.5. Rights of Holders.
(a) The Holders of a Majority in liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting of
any proceeding for any remedy available to the Preferred Guarantee Trustee in
respect of this Preferred Securities Guarantee or to direct the exercise of any
trust or power conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee.
(b) Any Holder may directly institute a legal proceeding against the
Guarantor to enforce the obligations of the Guarantor under this Preferred
Securities Guarantee without first instituting a legal proceeding against the
Trust, the Preferred Guarantee Trustee or any other Person.
(c) If an Event of Default with respect to the Debentures (an "Indenture
Event of Default"), constituting the failure to pay interest or principal on the
Debentures on the date such interest or principal is otherwise payable has
occurred and is continuing, then a Holder of Preferred Securities may directly,
at any time, institute a proceeding for enforcement of payment to such Holder of
the principal of or interest on the Debentures having a principal amount equal
to the aggregate liquidation amount of the Preferred Securities of such Holder
on or after the respective due date specified in the Debentures. The Holders of
Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Debentures unless the Property Trustee (as
defined in the Indenture) fails to do so.
SECTION 5.6. Guarantee of Payment.
This Preferred Securities Guarantee creates a guarantee of payment and
not of collection.
SECTION 5.7. Subrogation.
The Guarantor shall be subrogated to all, if any, rights of the Holders
against the Trust in respect of any amounts paid to such Holders by the
Guarantor under this Preferred Securities Guarantee; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or
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exercise any right that it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under this
Preferred Securities Guarantee, if, at the time of any such payment, any amounts
are due and unpaid under this Preferred Securities Guarantee. If any amount
shall be paid to the Guarantor in violation of the preceding sentence, the
Guarantor agrees to hold such amount in trust for the Holders and to pay over
such amount to the Holders.
SECTION 5.8. Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Trust with respect to the Preferred
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Preferred
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (g) inclusive, of Section 5.4 hereof.
SECTION 5.9. Conversion.
The Guarantor acknowledges its obligation to issue and deliver common
stock of the Guarantor upon the conversion of the Preferred Securities.
ARTICLE VI
LIMITATION OF TRANSACTIONS; RANKING
SECTION 6.1. Limitation of Transactions.
So long as any Preferred Securities remain outstanding, if there shall
have occurred any event of default under this Preferred Securities Guarantee or
any event that, with the giving of notice or the lapse of time or both, would
constitute an Event of Default under the Indenture, then the Guarantor has
agreed not to declare or pay dividends on, or make a distribution with respect
to, or redeem, purchase acquire or make a liquidation payment with respect to,
any of its capital stock (other than (i) purchases or acquisitions of shares of
common stock in connection with the satisfaction by the Guarantor of its
obligations under any employee benefit plans or the satisfaction by the
Guarantor of its obligations pursuant to any contract or security requiring the
Guarantor to purchase shares of common stock, (ii) as a result of a
reclassification of the
20
Guarantor's capital stock or the exchange or conversion of one class or series
of the Guarantor's capital stock for another class or series of the Guarantor's
capital stock or (iii) the purchase of fractional interests in shares of the
Guarantor's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged (or make any
guarantee payments with respect to the foregoing).
SECTION 6.2. Ranking.
(a) This Preferred Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior to all
other liabilities of the Guarantor except any liabilities that may be pari passu
expressly by their terms, (ii) pari passu with the most senior preferred stock
issued from time to time by the Guarantor and with any guarantee now or
hereafter entered into by the Guarantor in respect of any preferred or
preference stock or preferred securities of any Affiliate of the Guarantor, and
(iii) senior to the Guarantor's common stock.
(b) The holders of any obligations of the Guarantor that are senior in
priority to the obligations under this Preferred Securities Guarantee will be
entitled to all of the rights inuring to the holders of "Senior Indebtedness"
under Article 12 of the Indenture, and the Holders of the Preferred Securities
will be subject to all of the terms and conditions of such Article 12 with
respect to any claims or rights hereunder with the same effect as though fully
set forth herein.
ARTICLE VII
TERMINATION
SECTION 7 Termination.
This Preferred Securities Guarantee will terminate as to each Holder upon (i)
full payment of the Redemption Price of all Preferred Securities; or (ii)
distribution of the Debentures held by the Trust to the Holders; or (iii)
liquidation of the Trust, or (iv) upon the distribution of Guarantor's common
stock to such Holder in respect of conversion of such Holder's Preferred
Securities into common stock of the Guarantor. The Guarantee also will terminate
completely upon full payment of the amounts payable in
21
accordance with the Declaration of the Trust. This Preferred Securities
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder must restore payment of any sums paid under such
Preferred Securities or under this Preferred Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith in accordance with this Preferred Securities
Guarantee and in a manner that such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Preferred Securities Guarantee or by law, except that an Indemnified Person
shall be liable for any such loss, damage or claim incurred by reason of such
Indemnified Person's negligence or willful misconduct with respect to such acts
or omissions.
(b) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Guarantor and upon such information, opinions, reports
or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Preferred Securities might properly be paid.
SECTION 8.2. Indemnification.
The Guarantor agrees to indemnify each Indemnified Person for, and to hold
each Indemnified Person harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts
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hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against, or investigating, any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 8.2 shall
survive the termination of this Preferred Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Successors and Assigns.
All guarantees and agreements contained in this Preferred Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding. Except in connection with any
permitted merger or consolidation of the Guarantor with or into another entity
or any permitted sale, transfer or lease of the Guarantor's assets to another
entity as described in the Indenture, the Guarantor may not assign its rights or
delegate its obligations under this Preferred Securities Guarantee without the
prior approval of the Holders of at least a Majority of the aggregate stated
liquidation amount of the Preferred Securities then outstanding.
SECTION 9.2. Amendments.
Except with respect to any changes that do not materially adversely affect
the rights of Holders (in which case no vote will be required), this Preferred
Securities Guarantee may be amended only with the prior approval of the Holders
of at least a Majority in liquidation amount of all the outstanding Preferred
Securities. The provisions of Section 11.2 of the Declaration with respect to
meetings of Holders of the Preferred Securities apply to the giving of such
approval.
SECTION 9.3. Notices.
All notices provided for in this Preferred Securities Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
sent by facsimile or mailed by registered or certified mail, as follows:
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(a) If given to the Preferred Guarantee Trustee, at the Preferred Guarantee
Trustee's mailing address set forth below (or such other address as the
Preferred Guarantee Trustee may give notice of to the Holders of the Preferred
Securities):
IBJ Xxxxxxxx Bank & Trust Company
Xxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Corporate Trust & Agency Department
(b) If given to the Guarantor, at the Guarantor's mailing address set forth
below (or such other address as the Guarantor may give notice of to the Holders
of the Preferred Securities):
Designer Holdings Ltd.
0000 Xxxxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
(c) If given to any Holder at the address set forth on the books and records
of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 9.4. Benefit.
This Preferred Securities Guarantee is solely for the benefit of the Holders
of the Preferred Securities and, subject to Section 3.1(a), is not separately
transferable from the Preferred Securities.
SECTION 9.5. Governing Law.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK AND ALL
RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAWS.
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THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year first
above written.
DESIGNER HOLDINGS LTD., as Guarantor
By: /s/ XXXXXX X. XXXXX
---------------------------------------
Name: Xxxxxx X. Xxxxx
Title: President, Chief Executive
Officer and Director
IBJ XXXXXXXX BANK & TRUST COMPANY,
as Preferred Guarantee Trustee
By: /s/ XXXXXXX XxXXXXXXX
---------------------------------------
Name: Xxxxxxx XxXxxxxxx
Title: Vice President
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